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Liability Insurance

Life is full of uncertainties and nobody can predict a financial emergency. And insurance offers the desired protection from such uncertainties of life, and liability insurance or third-party liability insurance policy is one such policy that safeguards the insured from the various financial or legal crises that may arise from injuring a third-party during the policy period. These are various other insurance policies like health, travel, and car insurance but that are certain insurance plans like a liability insurance policy that are designed to cover specific risks.

What is Liability Insurance?

Liability insurance protects against third party claims arising out of causing property damage or injuries to people. It covers the payouts that the insured is liable to pay along with the legal costs. However, intentional damages, criminal prosecution and contractual liabilities are excluded under liability insurance.

Liability insurance is a type of insurance policy that safeguards individuals and/or businesses against risks that they may be held legally liable. Simply put, if the policyholder is liable for any third-party loss or damage then the insurer will recompense the damage incurred. Generally, the coverage is provided for both legal and financial liabilities until it is intentional.

Why Should You Buy Liability Insurance?

Liability insurance policies cover the insured against any claims due to causing bodily injuries and damages to the property of unknown people. Besides covering the legal costs involved, liability insurance provides coverage for payouts which the insured is legally liable to pay.

Risk management is important for every industry including liability coverage that protects the business/individual from financial turmoil and legal consequences.  If a member of the insured organization is held responsible for third-party injuries or property damage then liability insurance cover can be a saver. It offers legal and financial cover in case the product or services of a business prove to be a matter of risk to the customer, client, and the general public. Any loss or damage caused to a third party can put the business in legal trouble and using the insurance cover the company can pay for the damages or loss for which the insured is held responsible.

For business owners, industrial and non-industrial operators, product manufacturers, cab owners, hotels, doctors, can save from being sued if the compensation and legal settlement is done for loss/damages/injuries caused to a third-party or person. A liability insurance policy can also be purchased to protect employees from risks arising during business operations.

Who Should Buy Liability Insurance?

The policy is designed for the companies or individuals who are held legally liable for the injuries or other issues. This type of insurance policy is most suitable for doctors, hospitals, business owners and likewise.

For example, if a product manufacturing company sells a product that does damage to other people or products, then this manufacturing company may be sued for the loss or damages caused by its product. However, if this manufacturing company is procuring a liability cover plan, then the loss or legal costs will be covered by the insurer.

Liability insurance is covered under general insurance policies. The scope of liability insurance in India is defined by the Public Liability Act of 1991.

Types of Liability Insurance in India

There are different types of policies that are available in India catering to the different needs and requirements and the line of work of the customers. Some of the most common liability cover policies are:

Public Liability Cover

This type of policy is designed for those industries/companies that have a lot of interaction with the general public. It is suggested to buy this insurance policy to secure you from unnecessary financial risks and legal liabilities. Retail shops, shopping malls, clubs, theatres, and all those catering to the general public are advised to take this variant of liability policy.

Professional Indemnity Insurance

It is a type of liability policy that is designed for professionals such as medical practitioners, architects, engineers, lawyers, chartered accountants, and services that need to protect their business interests against legal claims for professional neglect, error, or omissions. 

Employer Liability

This policy is for employers who want to cover the liabilities of employees who may get injured because of the job. Generally, this insurance policy is known as Business Liability Insurance.

Product Liability

This policy is one of the most required policies for companies that are related to the production of tobacco, chemical industry, food, medical products, recreational products, etc.

Third-Party Liability

This policy is suitable for small industries or individuals who want coverage for damages or losses caused by them to a third party. In third-party insurance, the insured is the first party, the insurance provider is the second party, and the injured or the company/person who is making claim against the insured is referred to as a third-party.

Companies Offering Liability Insurance in India

There are many insurance providers that offer various forms of liability insurance in India, some of them are listed below:

ICICI Lombard Public Liability Insurance Policy

The insurer covers liabilities arising due to risks involved in both industrial and non-industrial sectors.

Public Liability Non-Industrial Risk- This type of policy is suitable for housing societies, offices, schools, hotels, etc. to cover damages caused to a third party including loss or damage caused to the property, bodily injury, disease, and accidental death.

Public Liability Industrial Risk- The plan covers the legal liabilities arising due to damages caused to a third-party in the manufacturing, warehousing and construction industries.

  • Bodily injury or disease
  • Accidental death
  • Property damage
  • Legal liabilities up to a specified limit

Tata AIG Public Liability Insurance Policy

The insurer provides three variants of public liability policy:

  • Public Liability Policy (Non- Industrial Risk) for its companies, hotels, BPOs, clubs, restaurants, and other non-manufacturing entities
  • Public Liability Policy (Industrial Risk) for manufacturing units
  • Public Liability Insurance Act Policy designed for business units dealing with hazardous substances

The coverage can be further extended to cover legal liabilities arising out of the act of god perils, transportation, accidental pollution, and while carrying treated effluents

Bharti AXA Commercial General Liability Policy

This policy is designed for Indian companies with global partners, and international companies operating in India covering third-party liabilities arising out of commercial operations. It works as a combination of Product Liability and Public Liability policies along with various add-on benefits.

Bajaj Allianz Liability Insurance

The insurer gives the option to select from different liability coverage plans such as liability insurance cover, public liability, product liability, product recall insurance, clinical trials insurance, workmen’s compensation, and professional liability cover.

Raheja QBE Liability Insurance

The policy offers coverage against public and product liabilities arising out of any business operations. The coverage includes public liability, product liability and combined general liability cover.

Reliance Public Liability Policy

The policy covers the liability of industries dealing with hazardous chemicals and compensates the affected people with hazardous substances.

Future Generali Public Liability Insurance

Future Generali offers coverage to the transporters, and users of non-industrial organizations like hospitals, schools, offices, hotels, and industrial set-ups like factories, godowns, warehouses.

Cholamandalam Liability Insurance

The policy is designed to covers any legal liability arising due to third-party injury or damage resulting during the insured premises. Coverage can also be extended to the god of perils, accidental pollution, and transportation. One can select from the public, product liability, professional indemnity, and directors' and officers' liability coverage.

Royal Sundaram Public Liability Insurance

The plan covers liabilities imposed by the general public against the insured for bodily injury, property damage.

Universal Sompo Public Liability Policy

The statutory risks or liabilities arising due to death or injury of a person or property damage resulting from the use of the hazardous substance are covered under Public Liability (Act) Insurance Policy. The insurer also provides Public Liability (Industrial and Storage Risks) for liabilities arising due to an incident in the insured premises or during the business. The insured can also enhance the coverage with optional extension cover.

How is the Liability Insurance Premium Decided?

The insurance company considers different factors before deciding the premium amount for a liability insurance policy taken by an individual or a company. The first and foremost factor that affects the premium of a policy is the amount of the risk that the products of the company or a company come up with. Higher the risk, higher would be the premium amount to be paid.

Other factors that are being considered by an insurance company include- the claim history of the insured, the approach of the company towards the risk, and the business record of the company.

Claim Process of Liability Insurance in India

The claim process varies from one insurance provider to another. Undoubtedly the procedure to file a liability claim requires extra documentation because of the legal framework and out of the court settlements. However, in case of any emergency, business or organization can follow the below general steps or refer to the process laid down by the insurance company:

  • Read the policy documents for coverage benefits that are permissible to claim, and how the claim needs to be filed
  • Intimate the insurance provider over a call or email or by visiting the nearest branch office
  • In case of theft or death, it is recommended to report at the nearest police station or the concerned authorities. This report will be required by the insurance company in addition to the claim form and the documents
  •  In some cases, the evidence is also required
  • The insurer will appoint a supervisor to examine the site of the incident or the damage caused to create a report and decide the compensation accordingly
  • The insurer will update about the claim status or one can check the claim status online

Why Policybazaar?

We compare quotes from leading insurance companies in India so you can be assured that you can find the liability insurance that suits your requirements the best. Find out how much you can save on liability insurance for your business by comparing and buying plans from Policy Bazaar. Simply enter your details on our easy-to-use application form and start comparing!

Written By: PolicyBazaar - Updated: 12 May 2020